Now that the holiday season is here, it’s important to get year-end tax planning out of the way before relaxing with your loved ones. Tax policies change every year, and your income may look very different next year. It’s crucial to examine tax optimization strategies between now and December 31 to maximize deductions, credits, and overall tax savings—and to make a game plan for the year ahead.

At Accounting Freedom, we’re here to help you focus on last-minute tax savings instead of last-minute stress. Here are our top recommendations to maximize your savings before the new year.

Maximize Contributions to Tax-Advantaged Accounts

Retirement Accounts

Contributing as much as possible to your retirement accounts is an excellent way to reduce taxable income while building a nest egg. If you have a traditional IRA or 401(k), you can take advantage of an immediate tax deduction (see the IRS guidelines for retirement contributions).

If your employer offers a match, it’s essentially free money that grows tax-deferred until retirement. For Roth IRAs, maxing out contributions is equally important. While taxes are paid upfront, the growth and distributions will be tax-free, and contributions may qualify for the Saver’s Credit.

Health Savings Accounts (HSAs)

HSAs are a vastly underutilized tool for saving on taxes and preparing for future medical expenses. If you’re enrolled in a high-deductible health plan, you can contribute pre-tax dollars, which grow tax-free and can be withdrawn tax-free for qualified expenses. If you’re unsure about your eligibility, consult your insurance documents or check the IRS HSA eligibility guidelines.

Flexible Spending Accounts (FSAs)

FSAs can cover various medical supplies, over-the-counter medications, and therapies not typically covered by insurance. Since most FSAs have a “use it or lose it” rule, spend any remaining funds before December 31. You can find a full list of eligible items in the FSA eligibility list.

Strategic Tax-Loss Harvesting

Tax-loss harvesting is a smart strategy to reduce taxable income by offsetting capital gains. Review your portfolio to identify underperforming investments and sell them before year-end to offset gains from other transactions. For additional guidance, consult our tax planning services.

Boost Deductions with Charitable Contributions

Giving back is a meaningful way to support causes you care about while saving on taxes.

• Cash Donations: Ensure all donations made via cash, check, or card are backed by a receipt.
• Non-Cash Donations: Proper documentation is required for items valued over $250, and obtaining a formal appraisal is recommended for high-value donations.
• Appreciated Investments: Donating appreciated assets can help you avoid capital gains taxes while claiming a deduction based on their fair market value.

Before finalizing donations, confirm the organization’s eligibility using the IRS Charity Navigator Tool to ensure your contributions qualify for tax deductions.

Adjust Income and Expenses

Year-end is the time to decide whether to defer or accelerate income and expenses based on your tax bracket:

• If your income is high this year: Defer income and accelerate deductions, such as property taxes and mortgage interest.
• If your income will increase next year: Accelerate income and defer expenses to take advantage of current rates.

For advice tailored to your financial situation, consider consulting our tax preparation team.

Ensure Withholding and Estimated Payments Are on Track

Review your federal and state tax withholdings to ensure you’ve paid enough throughout the year.

• For payroll deductions: Verify that withholding aligns with your income and tax obligations using the IRS Tax Withholding Estimator.
• For quarterly payments: Check whether your estimated payments are sufficient to avoid penalties. Adjust based on any significant income changes.

By addressing withholding now, you can enter 2025 with confidence and avoid surprises.

Consult a Professional for Tailored Advice

Year-end tax planning provides peace of mind, reduces the risk of unexpected tax bills, and maximizes savings opportunities. At Accounting Freedom, we offer personalized advice to eliminate the stress of tax season, so you can enjoy the holidays worry-free.

Contact us today to learn more about how we can help you make the most of these year-end tax-saving strategies. Let’s end the year on a strong financial note!